StepChange Debt Charity response to Farnish Review
20th March 2015
In response to today’s publication of the independent review of the Money Advice Service (MAS) led by Christine Farnish, and the Government’s response, StepChange Debt Charity Chief Executive Mike O’Connor said:
“The Review rightly focuses on the need to expand the reach of free debt advice services. For MAS to continue in its role as a facilitator and co-ordinator of the relevant work of charities and not-for-profit agencies, its focus should be on ensuring that free and independent debt advice is available to those who need it, that this advice is accessible via the most appropriate and cost-effective channels, and on encouraging people to take debt advice sooner, before problems mount up. MAS should only act as a provider of services where there are gaps in the sector.”
Extended breathing space guarantee
“The Review backs our call for an extended breathing space guarantee to protect people in problem debt from interest and charges which make their situation worse. It’s encouraging that the Government are going to review the issues, though we had hoped they might simply implement the recommendation.
"Those who take action to get back on their feet deserve support, but many are not being given the time and space they need to recover when they get into difficulty. We will work closely with the Government’s review so that this vital scheme can be implemented with minimum delay.
Funding for debt advice
“The Review recommends a significant reduction in funding for MAS. While levy payers are entitled to good value, the need for free debt and money advice already exceeds what is currently available, and is expected to grow. Consideration should first be given, therefore, to reallocating existing funding to frontline money and debt advice services before levy cuts are contemplated.
“We welcome the commitment by Energy UK and Water UK to play a fuller part in debt advice, as we are consistently seeing more and more people falling into arrears on essential household bills. Their initial contribution of £2m is a good first step towards closing the funding gap in free debt advice. However, StepChange Debt Charity calculates that it would cost around £100 million to help the remaining 1.4 million people in problem debt who are not currently getting advice. We need the next government to make addressing this gap a priority.
Debt Advice Steering Group
“We share Farnish’s view that opportunities exist for greater co-ordination and cost-effective supply in the free debt advice sector. The Review proposes new structures and processes for debt advice and the positioning of MAS’s brand, which raise issues of marketing, regulation and funding. We need to carefully consider all of these in more detail.
“The three major debt advice charities – StepChange Debt Charity, Citizen’s Advice and the Money Advice Trust – have already joined forces to create a Collaboration Group to identify how we can improve how we work together to serve the needs of indebted people. That group will consider Farnish’s detailed recommendations as part of its work, and feed into the new Debt Advice Steering Group. The free debt advice sector itself has prime responsibility for improving its service, its efficiency and its effectiveness, and is best placed to know what changes need to be made.
MAS’s role alongside the FCA
“We would have liked to have seen the review go further in clarifying the respective roles of MAS and the Financial Conduct Authority. As a charity that is now regulated by the FCA, we need clear lines of accountability between the FCA and MAS as regards activity within the debt advice and debt solutions sectors.
"We believe there is a need for legislative and institutional changes to resolve how MAS can best work with the FCA without the risk of becoming an overlapping and duplicative quasi-regulatory body. If MAS’s role is not backed by a clearer and more coherent statutory remit, arguments about its role will continue, and could consign MAS, its staff and the sector, to another period of criticism and uncertainty.”